Debt-to-equity swaps won’t resolve China’s debt woes

Earlier this month, the Chinese government sketched out how it intends to address the build up of corporate debt and the threat it poses to financial stability and China’s broader economic outlook. On the same day, it laid out a frame work for future debt-to-equity swaps between banks and troubled borrowers, a programme that policy makers see as central to their efforts to reduce corporate leverage. Since then, the first couple of debt-to-equity swaps have got underway, providing additional insight into how the programme will play out in practice.